7 ms·

PIGS (Portugal, Italy, Greece, Spain, missing anything here?) have high debt For simplification let's say they spend 10% of their anual budget servicing debt a

PIGS (Portugal, Italy, Greece, Spain, missing anything here?) have high debt For simplification let's say they spend 10% of their anual budget servicing debt at an average of 5% interest rate If the base interest rate rises by 50 bps, you could argue the average debt held by PIGS would eventually rise by the same amount, _at least_! So now you have 5.5% interest rates, which is a 10% increase So the anual budget used to service the debt would also increase by 10%, from 10% to 11% By buying bonds from these countries you pressure the yields down

spaniard89277 4y ago
Yeah but ECB creates incentives for ballooning current expenditure. At least in Spain, the government chooses helicoptering money over investment every single time. Or prestige projects (High Speed Rail) over practical ones (freight corridors with no so fast trains for people?), higher salaries for public employees (already high compared to private economy), public pensions, etc. The only demands seems to be higher taxes every year for everyone else. No optimization, just raising and raising taxes every time. This is not sustainable. Savings and income are taking a nosedive for everyone who's not sucking into the public budget. This situation is going to explode, and it's going to be ugly, not only for us. I'm pretty worried about it, honestly. Meanwhile half the country is cheering because the government is very good at selling their narratives and cooking the stats. The reality is we're getting poorer pretty fast. Maybe germans have some fucking great plan because in 10 years they won't sell many cars here.
- turbinerneiter 4y ago
  > Maybe germans have some fucking great plan because in 10 years they won't sell many cars here. They are trying to build cars there. Germany's trade surplus also leads to German companies investing more money abroad than at home. Also, what is Germany supposed to do? What are they doing wrong? EZB is not controlled by Germany, Germany in fact always complained about the low interest rates.
  - RobertoG 4y ago
    What Germany could have done is to accept a change in the treaties for a real fiscal capacity at the European level. But, instead of that, Germany preferred to enjoy access to a common market and devaluated Mark (that is basically what the Euro is) while pontificating from a high horse. Instead of a functional monetary union we get this mess. And now we all have to be solidary with Germany energy problems. We will see.
    - petre 4y ago
      > And now we all have to be solidary with Germany energy problems I this it's still better than Germany importing Russian gas. Their whole decarbonization strategy was based on Russian gas. This is how we ended up with gas labelled as "green". If you don't like'em, don't buy German cars, buy Seat. Technically also a German car built in Spain. At least you keep the factory workers employed.
      - RobertoG 4y ago
        That's your proposed solution? I shouldn't drive a BMW? I think I will aim for a political solution if you don't mind. There are two possibilities, a functional monetary union and a really democratic union or every country goes its way. Both work for me.
        petre 4y ago
        Yeah, that's one way to put pressure on Germany in order to obtain a political solution. If you go to Greece, almost every food product is labelled with ελληνικό προϊόν = greek product, because they do not buy food from Lidl or German beer. Cars? They usually buy Toyotas, French cars (PSA) or Italian FCA.
    - deleted 4y ago
      [deleted]
    - turbinerneiter 4y ago
      > What Germany could have done is to accept a change in the treaties for a real fiscal capacity at the European level. Can you elaborate on that? What are the ideas that Germany opposed? A lot of this reads like Germany is the boogie man and every other European country is their poor victim. That's a little bit to one-sided for me.
- RobertoG 4y ago
  Some obvious (or should be obvious) realities of our beloved currency area: -All countries can't be net exporters at the same time. If Germany want to be a net exporter, somebody have to be a net importer. -High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic. -For the same import/export ratio, if you reduce public expenditure, or the GDP will fall, or the private debt will grow. That's mathematics. -The current agreements of the Euro-Area forbid investment in industrial policies. If Spain wanted to spend money in creating some kind of industry that compete with Germany and protect it until is competitive, it would not be allow to do that. -Government spending in Spain could be better (if it was allowed, that it's not), but it's better than nothing, at least that you want the economy to collapse after a high grow of private debt. -The program of support of the PIGS(1) public debt of the ECB is not to help the PIGS, is for protecting the Euro. The moment they stop doing it, the Euro is done. That's how well this currency union was designed, that if follows its rules it disintegrate. (1) -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing.
  - legulere 4y ago
    There’s a lot of subsidies for chip production in eastern Germany. So it seems like you can do something like that under the EU rules.
    - RobertoG 4y ago
      -Public subsidies come from public expenses. If you are already importing more than exporting, you will have a public deficit. Public deficit are not allowed beyond a limit. So, if you are already a successful export economy, you have the resources to invest, otherwise you don't. -It's a common market, so not import taxes are allowed. That means that any new industry will have to compete with developed companies already established. -Public companies are encourage to be privatized, so, you can't keep an industrial base that it's not, for now, competitive. -The result is desindustrialization. Then those desindustrialized countries are accused of not being competitive. -In some cases, at the European level they realize that they are losing the strategic edge to other blocks, and some kind of program at the federal level is created. Like the current thing with the chips. Of course this programs never will result of giving the edge to one of the PIGS.
- weatherlite 4y ago
  > The reality is we're getting poorer pretty fast I think this will happen in most places for many reasons - the enormous debt is not just a European problem it's also an American and Chinese problem. Also declining demography, ESG investing and scarce energy resources and bunch of other problems it's not looking great. If we all just peacefully accept that standards of living have to go down for everyone (climate change is also a hint that we've pushed too far) maybe we can find some path forward.
  - Kon-Peki 4y ago
    > If we all just peacefully accept that standards of living have to go down for everyone Alternatively, we could all just agree that "standard of living" != "GDP". In the old days, measuring GDP was a lot easier than measuring the standard of living. They were highly correlated, so we used it as a proxy. But now, it's outdated, and it has been for 50+ years.
- deleted 4y ago
  [deleted]
fulafel 4y ago
From a currency area / international trade POV it's about the fundamental problems of having a common currency used among countries who have no common fiscal policy[1]. If Greece and Germany had their own currencies, the exchange rates set by the free forex markets would have fixed many of the curernt problems and their trade balances would be neutral, but instead Germany has been running high trade surpluses and Greece has had high trade deficits (leading to debt) due to how the euro floats, and the central bank interest rate instrument is blunt and applies equally to all currency union countries. See eg https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/06/24/revenge-of-the-optimum-currency-area/ https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/0... for some history of how this wasn't really unexpected. Interestingly in that article higher inflation is seen as a potentially promising tool: "[T]he burden of adjustment might be substantially less if the overall Eurozone inflation rate were higher, so that Spain and other peripheral nations could restore competitiveness simply by lagging inflation in the core countries" [1] The EU budget is tiny compared to national budgets (or eg federal budget in the US), < 3% of the EU GDP.
- eru 4y ago
  The nominal exchange rate is almost immaterial here. It's the 'real' exchange rate that matters for net trade. And that's almost completely a function of the rate of saving. But, do compare https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-strangulation-mechanism/ https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-...
patrickk 4y ago
Ireland was in the original PIIGS group[1] after the insane bank bailout in 2008, which skyrocketed debt levels. They've fallen since[2]. [1] https://en.wikipedia.org/wiki/PIGS_(economics) https://en.wikipedia.org/wiki/PIGS_(economics) [2] https://tradingeconomics.com/ireland/government-debt-to-gdp https://tradingeconomics.com/ireland/government-debt-to-gdp
- TurkishPoptart 4y ago
  To my understanding, they've since whored themselves out to Apple and Pfizer as a tech tax haven.
  - patrickk 4y ago
    That’s been going on for far longer than 2008 and isn’t connected with the bank bailout.
someloser 4y ago
Could it have been possible for you to provide your opinion regarding this matter without having gratuitously insulted millions of people for the countries you mention? I could also refer to you as a complete idiot in this discussion but that would not be civil of me would it?
- PaywallBuster 4y ago
  i'm from one of the aforementioned countries and PIIGS is a common denomination when referring to that group of countries https://en.wikipedia.org/wiki/PIGS_(economics) https://en.wikipedia.org/wiki/PIGS_(economics)
  - helloworld2022 4y ago
  - toyg 4y ago
    I'm from one of the aforementioned countries and there have been diplomatic remonstrations about its use, to the point that respected publications don't use it anymore. It's just blatant casual racism at this point.
  - FartyMcFarter 4y ago
    It used to be common and it's clearly derogatory, since the acronym itself sounds bad, and it was created to describe a negative situation in the first place (often with blame attached).
    - londons_explore 4y ago
      However you look at the situation, blame doesn't lay with the individual citizens of any of those countries - it lies with the policies chosen by the countries collective leadership. Insulting political policies is far more acceptable than insulting individuals.
      - 4y ago

spaniard89277 4y ago

Yeah but ECB creates incentives for ballooning current expenditure. At least in Spain, the government chooses helicoptering money over investment every single time. Or prestige projects (High Speed Rail) over practical ones (freight corridors with no so fast trains for people?), higher salaries for public employees (already high compared to private economy), public pensions, etc. The only demands seems to be higher taxes every year for everyone else. No optimization, just raising and raising taxes every time. This is not sustainable. Savings and income are taking a nosedive for everyone who's not sucking into the public budget. This situation is going to explode, and it's going to be ugly, not only for us. I'm pretty worried about it, honestly. Meanwhile half the country is cheering because the government is very good at selling their narratives and cooking the stats. The reality is we're getting poorer pretty fast. Maybe germans have some fucking great plan because in 10 years they won't sell many cars here.

turbinerneiter 4y ago
> Maybe germans have some fucking great plan because in 10 years they won't sell many cars here. They are trying to build cars there. Germany's trade surplus also leads to German companies investing more money abroad than at home. Also, what is Germany supposed to do? What are they doing wrong? EZB is not controlled by Germany, Germany in fact always complained about the low interest rates.
- RobertoG 4y ago
  What Germany could have done is to accept a change in the treaties for a real fiscal capacity at the European level. But, instead of that, Germany preferred to enjoy access to a common market and devaluated Mark (that is basically what the Euro is) while pontificating from a high horse. Instead of a functional monetary union we get this mess. And now we all have to be solidary with Germany energy problems. We will see.
  - petre 4y ago
    > And now we all have to be solidary with Germany energy problems I this it's still better than Germany importing Russian gas. Their whole decarbonization strategy was based on Russian gas. This is how we ended up with gas labelled as "green". If you don't like'em, don't buy German cars, buy Seat. Technically also a German car built in Spain. At least you keep the factory workers employed.
    - RobertoG 4y ago
      That's your proposed solution? I shouldn't drive a BMW? I think I will aim for a political solution if you don't mind. There are two possibilities, a functional monetary union and a really democratic union or every country goes its way. Both work for me.
      - petre 4y ago
        Yeah, that's one way to put pressure on Germany in order to obtain a political solution. If you go to Greece, almost every food product is labelled with ελληνικό προϊόν = greek product, because they do not buy food from Lidl or German beer. Cars? They usually buy Toyotas, French cars (PSA) or Italian FCA.
  - deleted 4y ago
    [deleted]
  - turbinerneiter 4y ago
    > What Germany could have done is to accept a change in the treaties for a real fiscal capacity at the European level. Can you elaborate on that? What are the ideas that Germany opposed? A lot of this reads like Germany is the boogie man and every other European country is their poor victim. That's a little bit to one-sided for me.
RobertoG 4y ago
Some obvious (or should be obvious) realities of our beloved currency area: -All countries can't be net exporters at the same time. If Germany want to be a net exporter, somebody have to be a net importer. -High public debt in your own currency supported by your central bank it's not problematic. High private debt is very problematic. -For the same import/export ratio, if you reduce public expenditure, or the GDP will fall, or the private debt will grow. That's mathematics. -The current agreements of the Euro-Area forbid investment in industrial policies. If Spain wanted to spend money in creating some kind of industry that compete with Germany and protect it until is competitive, it would not be allow to do that. -Government spending in Spain could be better (if it was allowed, that it's not), but it's better than nothing, at least that you want the economy to collapse after a high grow of private debt. -The program of support of the PIGS(1) public debt of the ECB is not to help the PIGS, is for protecting the Euro. The moment they stop doing it, the Euro is done. That's how well this currency union was designed, that if follows its rules it disintegrate. (1) -By the way, it seems that we can call 120 million person PIGS and nobody think is a bad thing.
- legulere 4y ago
  There’s a lot of subsidies for chip production in eastern Germany. So it seems like you can do something like that under the EU rules.
  - RobertoG 4y ago
    -Public subsidies come from public expenses. If you are already importing more than exporting, you will have a public deficit. Public deficit are not allowed beyond a limit. So, if you are already a successful export economy, you have the resources to invest, otherwise you don't. -It's a common market, so not import taxes are allowed. That means that any new industry will have to compete with developed companies already established. -Public companies are encourage to be privatized, so, you can't keep an industrial base that it's not, for now, competitive. -The result is desindustrialization. Then those desindustrialized countries are accused of not being competitive. -In some cases, at the European level they realize that they are losing the strategic edge to other blocks, and some kind of program at the federal level is created. Like the current thing with the chips. Of course this programs never will result of giving the edge to one of the PIGS.
weatherlite 4y ago
> The reality is we're getting poorer pretty fast I think this will happen in most places for many reasons - the enormous debt is not just a European problem it's also an American and Chinese problem. Also declining demography, ESG investing and scarce energy resources and bunch of other problems it's not looking great. If we all just peacefully accept that standards of living have to go down for everyone (climate change is also a hint that we've pushed too far) maybe we can find some path forward.
- Kon-Peki 4y ago
  > If we all just peacefully accept that standards of living have to go down for everyone Alternatively, we could all just agree that "standard of living" != "GDP". In the old days, measuring GDP was a lot easier than measuring the standard of living. They were highly correlated, so we used it as a proxy. But now, it's outdated, and it has been for 50+ years.
deleted 4y ago
[deleted]

fulafel 4y ago

From a currency area / international trade POV it's about the fundamental problems of having a common currency used among countries who have no common fiscal policy[1]. If Greece and Germany had their own currencies, the exchange rates set by the free forex markets would have fixed many of the curernt problems and their trade balances would be neutral, but instead Germany has been running high trade surpluses and Greece has had high trade deficits (leading to debt) due to how the euro floats, and the central bank interest rate instrument is blunt and applies equally to all currency union countries. See eg https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/06/24/revenge-of-the-optimum-currency-area/ https://archive.nytimes.com/krugman.blogs.nytimes.com/2012/0... for some history of how this wasn't really unexpected. Interestingly in that article higher inflation is seen as a potentially promising tool: "[T]he burden of adjustment might be substantially less if the overall Eurozone inflation rate were higher, so that Spain and other peripheral nations could restore competitiveness simply by lagging inflation in the core countries" [1] The EU budget is tiny compared to national budgets (or eg federal budget in the US), < 3% of the EU GDP.

eru 4y ago
The nominal exchange rate is almost immaterial here. It's the 'real' exchange rate that matters for net trade. And that's almost completely a function of the rate of saving. But, do compare https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-strangulation-mechanism/ https://marketmonetarist.com/2015/07/14/the-euro-a-monetary-...

patrickk 4y ago

Ireland was in the original PIIGS group[1] after the insane bank bailout in 2008, which skyrocketed debt levels. They've fallen since[2]. [1] https://en.wikipedia.org/wiki/PIGS_(economics) https://en.wikipedia.org/wiki/PIGS_(economics) [2] https://tradingeconomics.com/ireland/government-debt-to-gdp https://tradingeconomics.com/ireland/government-debt-to-gdp

TurkishPoptart 4y ago
To my understanding, they've since whored themselves out to Apple and Pfizer as a tech tax haven.
- patrickk 4y ago
  That’s been going on for far longer than 2008 and isn’t connected with the bank bailout.

someloser 4y ago

Could it have been possible for you to provide your opinion regarding this matter without having gratuitously insulted millions of people for the countries you mention? I could also refer to you as a complete idiot in this discussion but that would not be civil of me would it?

PaywallBuster 4y ago
i'm from one of the aforementioned countries and PIIGS is a common denomination when referring to that group of countries https://en.wikipedia.org/wiki/PIGS_(economics) https://en.wikipedia.org/wiki/PIGS_(economics)
- helloworld2022 4y ago
- toyg 4y ago
  I'm from one of the aforementioned countries and there have been diplomatic remonstrations about its use, to the point that respected publications don't use it anymore. It's just blatant casual racism at this point.
- FartyMcFarter 4y ago
  It used to be common and it's clearly derogatory, since the acronym itself sounds bad, and it was created to describe a negative situation in the first place (often with blame attached).
  - londons_explore 4y ago
    However you look at the situation, blame doesn't lay with the individual citizens of any of those countries - it lies with the policies chosen by the countries collective leadership. Insulting political policies is far more acceptable than insulting individuals.
    - 4y ago